Catalyst Investment Partners beat the fundraising target for its second fund targeting industrial outdoor storage, on the back of growing institutional interest in the niche sector, according to the firm.
The New York-based firm, which was founded three years ago and now owns and controls some 50 IOS sites across the US, closed Catalyst IOS Fund II at $186.9 million. That raise is above the intended target of $150 million, representatives told PERE. The new fund received capital from the US and overseas, and will allow the firm to grow its IOS portfolio to over $500 million in gross asset value.
“When we were raising capital for Fund I we were doing a lot of explaining on what IOS really is; it was much more of an educational pitch,” said Dan Haroun, Catalyst’s co-founder. “This time around the investors we spoke with really had good knowledge of what industrial outdoor storage was as an asset class… That was a very big change, even in the last few years, from an institutional fundraising standpoint and that allowed us to get this fund oversubscribed and closed in a pretty quick fashion.”
Catalyst’s first fund was raised a few years ago, mainly with family office capital, Haroun told PERE in an interview. That family office capital came back for this fund, but it has a higher concentration of institutional capital, with participants ranging from endowments, outsourced chief investment officers, registered investment advisers and wealth managers.
The fund series is focused on densely-populated, infill industrial markets with high barriers to entry on the US East Coast, according to Catalyst. The firm views population density – which averages 950,000 residents within a 10-mile radius of each site – as a key indicator that rents will grow.
Typically, IOS refers to land that is zoned for an industrial use where a tenant would have outdoor storage requirements, such as vehicles, equipment or containers. Truck facilities are also considered IOS properties and typically take up between two and 10 acres of land, with a small building on it. The building-to-land ratio is generally under 20 percent, according to Green Street Advisors, which has referred to the asset as a “beautiful ugly duckling.”
Logistics has been a strong performer in the US throughout the tumult of an elevated interest rate environment – though parts of the market are battling against oversupply and heightened costs. Max Heiden, Catalyst’s co-founder with Haroun, said the firm has an advantage with its laser focus on supply-constrained markets.
“It’s really important in this sector, more so than in other asset classes, to be in markets where you have a very high barrier to entry and you have supply constraints,” he said.
And while institutional interest in the property type has been growing, there is little market data readily available on this particular type of real estate – which gives specialist firms an additional edge, Heiden added.
“The only people who really have a strong handle on the market rents are people who are in this particular sector all day, every day,” he said.
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